Frequently Asked Questions

What is the difference between an unsubsidized and a subsidized loan?

A subsidized loan is based on the borrower’s need.  The federal government pays the interest that accrues during deferments.  An unsubsidized loan is not need based and the borrower is responsible for the interest, including during times of deferment.

What is the difference between forbearance and a deferment?

A deferment is an entitlement, meaning it must be granted if you qualify.  Most forbearance is granted at a lender’s discretion.  During deferment, the federal government pays interest that accrues on a subsidized loan.  The borrower is responsible for interest that accrues during a deferment on an unsubsidized loan as well as during forbearance. 

Additionally, the interest that accrues becomes “capitalized.” Capitalization is when accrued interest and the principal balance are added together. Then interest accrues on that new total.

Remember, you must request a deferment or forbearance in order for it to be granted.  The lender or servicer does not automatically grant deferments or forbearance.

How much forbearance time do lenders allow during the life of my loan?

Forbearance time varies from lender to lender.  It is best to contact your lender directly to find out what their policy is.

I have made payments on my loan.  Why is my balance increasing instead of decreasing?

There are a number of reasons this could happen.  The most common reasons are:

	If you have used forbearance or deferment time (without making payments during that time), your interest was capitalized during your postponement period, making the amount you owe greater.
	If you are making regular monthly payments but your payments are less than the minimum amount due, there is a very good chance that your balance will increase.
	The interest may be accruing at a rate higher than your payments.
	If you were ever late with payments, your lender may have added late charges.

I have been enrolled in school.  I thought my loans would automatically be deferred.

Never assume that a deferment is automatically granted on your loans.  It is your responsibility to apply for deferments and make sure they are processed.  Certain in-school deferments are only for the current semester, so you will need to request a deferment each semester.

I can’t afford my payments. Can I get them lowered?

As long as your lender considers your loan current, you can request reduced payments from your lender.  Some options available include: 

Graduated Repayment Plan
Your payments will be lowered now and gradually increase every 2 years throughout the life of your loan.

Income Sensitive Repayment
Your payments are based on your gross income compared to the amount of your federal student loan debt.  This plan is renewed every 12 months.

Consolidation Programs
Depending on which consolidation program you choose, the repayment options and/or length of your repayment period may result in lower payments. 

I thought I would have a 6-month grace period after I left school before I would have to resume payments.

The six-month grace period is offered only once.  So, if you have already used it, during an earlier separation from school, you are not eligible for another six-month grace period.

If, however, you return to school and receive a new loan, you would be eligible for a grace period on the new loan only.  When you separate from school again, your earlier loans would go into immediate repayment unless you ask your lender for a forbearance to realign your repayment.

If my lender grants me forbearance, will my payments be higher at the end of the forbearance period?

If you do not make at least interest payments during your forbearance period, the interest will be capitalized (added to the principal balance of the loan).  This could result in higher monthly payments.  How much your payments increase depends on how long your forbearance lasts and the term of your loan.

I’m doing my best to bring my account current.  I will be enrolling in school next semester.  Am I going to be able to get another loan?

You should still be able to get another student loan as long as you are not in default on your existing loan.  It’s very important to continue to try to bring your account current.

I was not receiving bills from my lender so I did not make the payments.  Now I am past due on my student loan.  Am I still responsible for the past due amount?

Yes, in your promissory note, it states that if you do not receive statements, no matter what the circumstances, you are responsible for the payments.  It is very important that, if you move or change your phone number, you contact your lender or servicer immediately.

I am out of deferment and forbearance options.  Are there any other repayment options for me?

Yes.  You can increase each of your monthly payments until your account is current.  Or you could discuss other repayment options such as income sensitive repayment, graduated repayment or interest only repayment.

I took out a PLUS loan for my child and he is making the payments.  He is past due.  Why is the lender/servicer calling me and sending letters to me?  It’s also showing past due on my credit report but not on my child’s.

Since your signature is on the Promissory Note, this loan is in your name, which makes you ultimately responsible for repayment.  Your lender/servicer will continue to contact you until the loan is current.

I want to consolidate my student loans.  Who is the best company to go through?

Contact the lender/servicer of your existing loan(s).  They will be able to help you with a consolidation.

Can I make payments while I am in deferment or forbearance?

Yes.  In fact, making payments that at least equal the accruing interest will prevent your balance from increasing while you are in deferment or forbearance.

How do I know if I am in deferment or forbearance?

After you apply for the deferment or forbearance, you should receive written confirmation from your lender/servicer within 10 to 14 days.  If you do not hear from your lender/servicer within that time, contact them to find out the status of your loan.